May 3, 2018. Dry

–Utter lack of drama associated with both the treasury refunding and the FOMC announcement. Yields barely changed on the day. The financial press focused on Tesla’s earnings call, and Musk’s terse cut-off of inquiries. “Sorry,” Musk said, “these questions are so dry. They’re killing me.” I guess Musk wants analysts to reflect on the big picture of really cool design and technology, and keep pesky issues like HUGE CASH BURN under the floor mats. Could it be that this second topic wends its way into the more general economic discussion? How patient are creditors given low yields? There was a story yesterday that *gasp* Argentina’s 100 year bond was under water as the currency tanks. So forgiving and yield-starved were the capital markets that Argentina easily floated 100 year bonds. That was then…
–Well, Elon, you don’t like dry and boring? Then stay away from interest rate options. (And, for that matter, avoid presentations on SOFR). Yesterday straddles continued their descent. Seller of 100k 0EM 9712.5p at 5.5 caused 0EM straddle to settle 11.5 from 12.5. Total of 121k open interest evaporated in 0EM puts alone (72k in the aforementioned 9712 strike). The shorts are throwing in the towel. USM up a few ticks and the atm call sat unchanged, with all the damage accruing to the puts.
–Today’s news includes Factory orders expected +1.3 and ISM Services at 58.4. US trade delegation in China.

Posted on May 3, 2018 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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